BIS warns AI bust threatens global financial stability

The Bank for International Settlements has warned that a potential bust in artificial intelligence investments, alongside persistent inflation and high sovereign debt, poses a significant threat to global financial stability. The BIS, an institution that advises the world's central banks, issued the caution in its annual economic report published on Sunday, June 28, 2026.

The report states that disappointment in AI returns could trigger a sudden pullback in financing, turning the current capital expenditure boom into a protracted investment bust with knock-on effects on financial conditions. It highlighted that the five largest technology "hyperscalers" are expected to invest more than $1 trillion from 2025 through the end of 2026, funded in part by hundreds of billions in corporate debt issuance. Officials warned that a major equity market correction linked to AI could have larger macroeconomic consequences today than in past cycles, given households' greater exposure to stocks.

A specific concern raised involves complex, opaque financing arrangements known as circular deals. The BIS described arrangements where chipmakers take stakes in AI labs, which in turn commit to...